Connecticut 2021 2021 Regular Session

Connecticut Senate Bill SB01104 Comm Sub / Analysis

Filed 05/11/2021

                     
Researcher: RP 	Page 1 	5/11/21 
 
 
 
OLR Bill Analysis 
sSB 1104  
 
AN ACT CONCERNING COMMUNITY RESTORATION FUNDS.  
 
SUMMARY 
This bill imposes a 20% state sales tax and a 3% local sales tax on 
cannabis and cannabis products (excluding cannabis for palliative use), 
beginning on and after the date the Department of Consumer 
Protection (DCP) first issues a license to a cannabis retailer. 
The bill directs the (1) state sales tax revenue from cannabis sales to 
a new Community Development Corporation (CDC) Trust Fund and 
(2) local sales tax revenue to a new municipal cannabis revenue 
account. It requires the Department of Revenue Services (DRS) 
commissioner to distribute the funds in the municipal cannabis 
revenue account each quarter to municipalities on a point-of-sale basis. 
Any funds for which the commissioner cannot determine the point of 
sale must be transferred to the CDC Trust Fund. 
The bill also creates a framework for establishing nonprofit CDCs to 
partner with qualifying community development credit unions 
(CDCUs) in undertaking specified community restoration and 
revitalization programs and activities. It establishes a seven-member 
legislative council (the CDC oversight council) to designate the CDCs 
and CDCUs and oversee the distribution of cannabis tax revenue in the 
CDC Trust Fund for the programs and activities. It also establishes a 
process by which the Office of Policy and Management (OPM) 
secretary and CDC oversight council identify and designate 
community impact zones in which CDCs and CDCUs focus their 
programs and activities. 
Lastly, the bill authorizes the state, municipalities, and nonprofit 
organizations that are exempt from property tax to make deposits with 
CDCUs that must in turn be invested by the CDCU to further the bill’s  2021SB-01104-R000663-BA.DOCX 
 
Researcher: RP 	Page 2 	5/11/21 
 
community restoration and revitalization purposes. 
EFFECTIVE DATE: Upon passage 
§ 1 — COMMUNITY DEVELOPMEN T CORPORATIONS 
Eligible Entities 
The bill establishes the criteria organizations must meet in order to 
be designated as a CDC. 
Under the bill, an entity may apply to the council to be designated 
as a CDC if it (1) is exempt from federal tax under section 501(c) of the 
federal tax code, (2) is located in a distressed municipality (see 
BACKGROUND) at the time of its application, and (3) meets the 
following requirements: 
1. has demonstrated effectiveness in, or has been formed for the 
purposes of, building, attracting, and retaining neighborhood 
wealth; 
2. provides financial, educational, or related services to support 
initiatives that concentrate investments in human capital and 
infrastructure in a specific neighborhood or neighborhoods, 
with measurable community revitalization achievements; 
3. agrees to focus all of its efforts in the distressed municipality in 
which it is located;  
4. agrees to establish or relocate its primary office in a community 
impact zone (described below) within the municipality after the 
zones are designated; and 
5. agrees to establish or relocate any auxiliary locations to the 
municipality in which it is located. 
Programs, Services, and Assistance 
The bill requires each CDC to provide specific programs, services, 
and assistance or grants to support community reinvestment strategies 
in the community impact zone in which it is located. Its initiatives 
must include the programs and services described below, in the order  2021SB-01104-R000663-BA.DOCX 
 
Researcher: RP 	Page 3 	5/11/21 
 
of priority listed. If the CDC has insufficient funds to execute these 
strategies to a high level of quality, it must pursue each strategy in the 
order listed, with an emphasis on achieving high quality before 
undertaking the next strategy. 
Early Childhood. The CDC must encourage early childhood 
initiatives by providing, directly or in collaboration with other entities, 
free or low-cost early childhood education services to families living 
within the community impact zone, regardless of their income. The 
services must include kindergarten preparedness and readiness 
assessments. The CDC may expand its services to areas within the 
municipality that are outside the community impact zone that have 
poverty levels exceeding the municipal average. 
Educational Achievement. The CDC must increase achievement at 
public elementary and middle schools in the zone. It must coordinate 
with officials at these schools to submit grant applications to the CDC 
oversight council to supplement per-student funding so that it matches 
or approaches the highest levels of per-student funding at any 
elementary or middle school in the state. Schools receiving grants must 
(1) set goals to achieve statewide mastery test scores in the top 
percentiles, based on specific target goals set for each school by the 
council, and (2) guarantee that a student residing in the zone will be 
able to attend that specific school. 
Community Assets. The CDC must rebuild community assets by 
constructing, renovating, or repairing neighborhood structures or 
assets that are significant to the economy or community. These include 
playgrounds, sidewalks, parks, community centers, senior centers, 
public libraries, urban gardens, and green spaces. (Presumably, a CDC 
would undertake these efforts in conjunction with the municipality or 
property owner that owns or controls the asset or structure.) To be 
eligible for funding, the structures or assets must be owned by (1) the 
federal government, state, or municipality; (2) the CDC; (3) the 
partnered CDCU; or (4) a resident of the municipality in which it is 
located. The CDC must seek to train zone residents to do some of the 
work the projects require, either directly or indirectly with other  2021SB-01104-R000663-BA.DOCX 
 
Researcher: RP 	Page 4 	5/11/21 
 
entities or through partnerships with existing technical education and 
apprenticeship programs. 
The CDC must also retain, sell, or rent these structures or assets 
after their completion, but it may sell them only to zone residents. The 
partnered CDCU may develop a cooperative model for owning and 
renting the structures and assets. 
Homeownership. The CDC must increase homeownership rates by 
doing the following: 
1. It must track and make efforts to increase the percentage of 
owner-occupied residential buildings in the zone. It must set 
five-year target percentages and periodically evaluate and 
revise its target amounts. 
2. It must restore and repair multifamily rental buildings located 
in the zone to convert them into owner-occupied residential 
buildings or multifamily cooperative buildings with at least one 
rental unit. To be eligible for funding, the property must 
generally be owned by the CDC, the partnered CDCU, or a 
resident of the municipality. However, properties that are not 
owned by such entities or individuals may still be considered 
for funding if the building’s owner agrees, in writing, to the 
corporation’s terms furthering the bill’s homeownership 
purposes. The CDC may also promote participation in existing 
state and housing programs to encourage owner occupancy. 
3. As with the community structures and assets described above, 
the CDC must retain, sell, or rent the buildings after their 
completion, but it may sell them only to zone residents. The 
CDC or partnered CDCU may develop a cooperative ownership 
or rental model for the buildings. 
Homebuyer Education and Financial Literacy. The CDC must 
support pathways to homeownership by partnering with existing 
programs to offer education and financial literacy programs. The 
partnerships must be joint efforts between the CDC and its partnered  2021SB-01104-R000663-BA.DOCX 
 
Researcher: RP 	Page 5 	5/11/21 
 
CDCU and each CDCU may develop and offer subsidized or 
incentivized financial products for individuals who participate in the 
programs. 
Job Pipelines for Zone Residents. The CDC must consult or 
coordinate with other organizations, including the Workforce 
Investment Boards, to implement or participate in community work-
based training programs. The programs must provide pre -
apprenticeship or apprenticeship opportunities through instruction or 
training to (1) increase literacy, math, and other technical, 
prevocational, or vocational skills and (2) connect workforce, economic 
development, and education systems with businesses and other zone 
stakeholders. The CDC’s efforts must focus on (1) zone residents and 
(2) businesses offering or carrying out training programs in the 
following order of priority: in the zone, in the municipality, and 
outside the municipality. 
 The CDC must also place zone residents with businesses that offer 
employment or on-the-job training. It must select businesses in the 
following order of priority: within the zone, within the municipality, 
and outside the municipality if the opportunities in the zone and 
municipality have been exhausted.  
Community and Senior Centers. The CDC must (1) expand access 
to programs at existing community or senior centers that serve zone 
residents, regardless of age, or (2) convert the centers to ones to serve 
all zone residents, regardless of age. (Presumably, a CDC would 
undertake these efforts in conjunction with the municipality or 
organization that runs the existing community or senior center.) 
Transportation. The CDC must provide municipal residents with 
low-cost transportation options by developing or supporting 
transportation alternatives within and between municipalities for 
travel to and from work, home, school, retail stores, and entertainment 
venues. 
Powers  2021SB-01104-R000663-BA.DOCX 
 
Researcher: RP 	Page 6 	5/11/21 
 
Under the bill, a CDC may: 
1. acquire the real property described above (e.g., community 
assets and structures and multifamily residential buildings) in 
coordination with its partnered CDCU; 
2. operate as a contractor or subcontractor, or establish a 
subsidiary to do so, as long as the CDC or subsidiary complies 
with all applicable state licensing and registration requirements; 
and 
3. partner or contract with contractors or subcontractors to carry 
out projects and related work for the purposes described above, 
provided the CDC gives first priority to a contractor or 
subcontractor located in the zone and second priority to one 
located in the municipality. 
Partnerships with CDCUs 
No later than six months after being designated a CDC, the 
corporation must (1) identify a Connecticut credit union located within 
the municipality in which the CDC is located that will apply to the 
CDC oversight council to be designated as a CDCU or (2) issue a 
request for proposal for the organization of a new Connecticut credit 
union, or an existing Connecticut credit union, to partner with the 
CDC. 
Foreclosed or Auctioned Property 
A CDC must be offered the right of first refusal in the sale of any 
real property in the zone that has been foreclosed or is being sold at 
public auction, provided it has notified the mortgagee or municipal tax 
collector, as applicable, of its interest in acquiring the property. Under 
the bill, this provision applies regardless of the state laws on mortgage 
foreclosures and tax sales. 
Financial Report 
The bill requires each CDC to submit a financial report to the CDC 
oversight council, including any information the council requires. It 
must submit the report as often as the council requires, but at least  2021SB-01104-R000663-BA.DOCX 
 
Researcher: RP 	Page 7 	5/11/21 
 
annually.  
Removing a CDC Designation 
The bill allows a CDC to request that its designation be removed. 
The CDC oversight council may grant the request as long as it 
designates another entity to replace the CDC, based on prior 
applications or through a new request for applications. 
The bill also authorizes the council to remove a CDC’s designation if 
(1) it determines that the CDC is unable to carry out or deficient in 
carrying out the purposes described above and (2) the corporation was 
given the opportunity to address and improve the deficiencies noted 
by the council. 
§§ 2 & 9 — COMMUNITY DEVELOPMEN T CREDIT UNIONS  
Authorization 
The bill authorizes Connecticut credit unions to (1) partner with 
CDCs; (2) be designated as CDCUs, and if designated, engage in the 
activities authorized under the bill; and (3) issue social impact bonds, 
as described below.  
Under the bill, Connecticut credit union service organizations may 
also be designated as CDCUs. By law, a Connecticut credit union 
service organization is an organization that is incorporated under the 
state’s laws and established by at least one Connecticut credit union or 
wholly owned by a federal or out-of-state credit union that converted 
to a Connecticut credit union. 
Eligible Credit Unions 
The bill authorizes Connecticut credit unions and credit union 
service organizations to apply to the CDC oversight council to be 
designated as a CDCU. To be designated, the credit union or credit 
union service organization must: 
1. serve low- and moderate-income people and communities with 
limited access to affordable financial services and products, 
with priority, and  2021SB-01104-R000663-BA.DOCX 
 
Researcher: RP 	Page 8 	5/11/21 
 
2. agree to partner with at least one CDC and focus its activities 
and efforts to support the corporation’s purposes.  
The CDC oversight council must give priority to credit unions and 
credit union service organizations that specialize in: 
1. providing home mortgages or small business loans to members 
with imperfect, limited, or no credit history; 
2. providing financial education and counseling to members; and 
3. offering products, services, and support at a low or reasonable 
cost to members. 
Duties and Powers 
Under the bill, each CDCU must do the following: 
1. submit its governance structure to the CDC oversight council 
for review; 
2. approve the addition of the CDC’s representatives to its 
governing board, executive committee, supervisory committee, 
or similar entity, in such numbers and as the credit union and 
CDC agree; 
3. if applicable and necessary, expand its field of membership to 
allow residents of all community impact zones within the 
municipality in which its partnered CDC is located to be 
members of the credit union; 
4. offer or agree to offer free or low-cost basic checking and 
savings account services to all residents of the zone in which its 
partnered CDC is located; 
5. agree to establish in or move a location to the zone after it is 
designated (as described below) (but the bill specifies that the 
credit union is not precluded from establishing or having 
locations elsewhere in the state or municipality in which the 
zone is located); and  2021SB-01104-R000663-BA.DOCX 
 
Researcher: RP 	Page 9 	5/11/21 
 
6. develop and issue social impact bonds, in consultation with its 
partnered CDC, to support or supplement the CDC’s efforts. 
The bill specifies that the social impact bonds must be designed to 
maximize tax benefits to investors in cases where the community 
impact zone aligns with federally designated opportunity zones. 
Financing CDC Activities 
The bill authorizes each CDCU to develop low-cost or subsidized 
financial products and services to support its CDC’s goals and apply to 
the CDC oversight council for funding to do so. It also authorizes each 
CDCU to collaborate with its CDC to help finance or facilitate 
investments in real property or community structures and assets, as 
described above. 
Financial Report 
Each CDCU must submit a financial report to the CDC oversight 
council, including any information the council requires. It must submit 
the report as often as the council requires, but at least annually.  
Removing a CDCU Designation 
The bill allows a CDCU to request that its designation be removed 
and to cease its partnership with the CDC. The CDC oversight council 
may grant the request as long as the CDC identifies another credit 
union or credit union service organization to replace it or issues a 
request for proposal for one. 
The bill also authorizes the council to remove a CDCU’s designation 
if (1) it determines that the CDCU is unable to carry out or is deficient 
in carrying out the purposes described above and (2) the CDCU was 
given the opportunity to address and improve the deficiencies noted 
by the council. 
§ 3 — CDC OVERSIGHT COUNCI L 
Membership and Governance 
The bill establishes a seven-member legislative council comprised of 
the treasurer, Department of Economic and Community Development  2021SB-01104-R000663-BA.DOCX 
 
Researcher: RP 	Page 10 	5/11/21 
 
(DECD) commissioner, Commission on Women, Children, Seniors, 
Equity and Opportunity executive director, and four members 
appointed by the governor. The governor must seek to appoint 
individuals (1) with broad community knowledge and experience with 
communities within the eligible census tracts described below and (2) 
who reflect the ethnic, gender, and economic diversity of these 
communities. He must make his appointments between August 1, 2021 
and August 31, 2021. 
The treasurer and DECD commissioner must co-chair the council 
and jointly schedule and hold its first meeting by September 1, 2021. 
Beginning on and after January 1, 2022, the council must meet at least 
six times each year. A majority of the council constitutes a quorum for 
transacting business.  
Vacancies must be filled for the unexpired term by the appointing 
authority (i.e., governor). (However, the bill does not specify the term 
length for appointees.) Council members are not paid, but must be 
reimbursed for expenses within available funds. The Commerce 
Committee’s administrative staff serve as the council’s staff. 
Duties 
The bill requires the council to perform the following duties: 
1. establish eligibility criteria for designating CDCs, CDCUs, and 
community impact zones and designate them in accordance 
with the bill; 
2. establish an annual budget as described below; 
3. oversee the investments, deposits, and disbursements for the 
Community Development Corporation Trust Fund; 
4. approve CDC and CDCU programs, services, and activities to 
further their purposes;  
5. oversee, support, and coordinate these programs, services, and 
activities within and across municipalities and with other  2021SB-01104-R000663-BA.DOCX 
 
Researcher: RP 	Page 11 	5/11/21 
 
relevant state agencies, entities, and initiatives; 
6. advise CDCs, CDCUs, state agencies, and other entities on the 
core purposes of CDCs and CDCUs; 
7. review the disbursement of funds to CDCs and CDCUs, and 
contracts entered into by these entities, to evaluate their impact 
and effectiveness and ensure that decisions they make 
regarding services, grants, or financial instruments are based 
solely on the purposes described under the bill; 
8. review the reports CDCs and CDCUs submit to it; and 
9. do all things necessary to carry out its duties and 
responsibilities under the bill. 
Designating CDCUs 
The bill requires the council to designate CDCUs from among 
applicants that fulfill the bill’s requirements. It may designate only one 
CDCU for each municipality (i.e., town, city, borough, consolidated 
town and city, or consolidated town and borough). 
Designating CDCs 
Criteria. By October 1, 2021, the council must release its criteria for 
prospective applicants seeking to be designated as a CDC. In addition 
to the eligibility requirements for CDCs described above, the council’s 
criteria must consider (1) whether the applicant’s leadership and 
governance has broad community representation, with an emphasis on 
ethnic and economic diversity reflective of the municipality in which it 
is located, and (2) the professional competence and relevant experience 
of its management and staff. 
Required Submissions. Each applicant must include a letter of 
support from the municipality’s chief elected official and a statement 
that the applicant agrees to locate its office in a community impact 
zone once these zones are designated.  
Deadlines. The council must accept applications from October 1,  2021SB-01104-R000663-BA.DOCX 
 
Researcher: RP 	Page 12 	5/11/21 
 
2021 through January 31, 2022, and announce its selections by March 1, 
2022. The council may designate only one CDC for each municipality. 
Annual Budget 
The council must establish an annual budget that sets forth the 
amount in the CDC Trust Fund to be (1) invested; (2) disbursed for 
CDC and CDCU programs, services, activities, and expenses; and (3) 
set aside for the intensive reading instruction program and mental 
health or substance abuse disorder treatment services described below.  
Intensive Reading Instruction Program. The council’s budget 
must set aside an amount equal to the amount appropriated in the 
state budget act, up to $3 million, for the State Department of 
Education’s (SDE) intensive reading program for grades kindergarten 
through three and select low-achieving elementary schools. The 
council may reduce the amount set aside for the program if there are 
insufficient funds in the CDC Trust Fund to provide for the CDC and 
CDCU purposes established under the bill.  
The council must make the set-aside funds available to implement 
or support the intensive reading instruction program or any statewide 
early literacy initiative SDE develops and implements, regardless of 
whether the program relates to a community impact zone or qualifies 
for other CDC or CDCU programs or funding. The set-aside funds 
must supplement any existing or available funding.  
The council must (1) establish application forms and criteria for the 
funds and (2) give first priority to applications from schools located in 
a community impact zone, as long as all such schools apply. Any funds 
awarded to these schools must be distributed on a zone-wide basis and 
be used solely to make the program available to all students reading 
below proficiency level who live, or attend a school, in the zone. 
The council must give second priority to applications from schools 
located in a distressed municipality on the basis of their student 
reading achievement level, as determined by the SDE commissioner. 
Mental Health and Substance Abuse Disorder Treatment  2021SB-01104-R000663-BA.DOCX 
 
Researcher: RP 	Page 13 	5/11/21 
 
Services. The council must set aside an amount in its annual budget 
to provide financial assistance to health care providers and facilities 
providing mental health or substance abuse disorder treatment 
services in any municipality. The council must (1) determine the 
amount to be set aside, (2) establish eligibility requirements for the 
assistance, and (3) publicize its availability to the relevant community. 
Investment Plan 
The council must, in consultation with the treasurer and 
Connecticut Green Bank’s chief executive officer, adopt an investment 
plan with the goals of (1) yielding long-term investment returns to 
support CDC and CDCU programs, services, and activities and (2) 
supporting a substantial portion of the fund’s annual expenditures 
from the investment returns. The initial investment plan must establish 
an investment strategy for at least 20 years; the council may 
periodically revise the plan by affirmative vote. 
The council must annually review the plan and investment returns 
generated and adjust the amounts invested and disbursed each year 
accordingly. 
Social Impact Bonds 
The council must develop a proposal to allow social impact bonds to 
be issued by the state to support public schools located in community 
impact zones. By February 1, 2022, the OPM secretary must report to 
the General Assembly on the proposal, including recommendations on 
ways to leverage the opportunity zone program to support these 
schools. 
Audits 
The council may require an external, independent audit of any CDC 
or CDCU. It may also request the Auditors of Public Accounts to 
perform audits and other related evaluations to facilitate the council’s 
responsibilities under the bill. The auditors must perform any 
requested audits and evaluations. 
Legislative Report  2021SB-01104-R000663-BA.DOCX 
 
Researcher: RP 	Page 14 	5/11/21 
 
Annually, beginning by February 1, 2024, the council must report to 
the governor and General Assembly and provide: 
1. a list of CDCs, CDCUs, and community impact zones 
designated to date and 
2. a summary of CDC and CDCU programs, services, activities, 
and efforts and the CDC Trust Fund disbursements to support 
them. 
§ 3 — COMMUNITY IMPACT ZON ES 
The bill establishes a process by which the OPM secretary and CDC 
oversight council identify and designate community impact zones (i.e., 
the targeted areas in which CDCs and CDCUs focus their activities). 
Metrics for Selecting Census Tracts 
The process begins with the OPM secretary selecting eligible census 
tracts within distressed municipalities that will be eligible to have a 
designated community impact zone. In selecting the tracts, the 
secretary must consider the: 
1. educational level attained by the tract’s population, specifically 
the percentage that has attained an associate or bachelor’s 
degree; 
2. most recent third grade reading and math scores on the 
statewide mastery test; 
3. unemployment rate; 
4. state of the local economy, employment availability, and job 
access and diversity; 
5. percentage of the population receiving public assistance; 
6. percentage of the population below the federal poverty level; 
7. homeownership rate; 
8. percentage of vacant housing; and  2021SB-01104-R000663-BA.DOCX 
 
Researcher: RP 	Page 15 	5/11/21 
 
9. crime rates. 
By August 1, 2021, the OPM secretary must release a list of census 
tracts eligible for consideration, based on a demonstration of the 
greatest socioeconomic need using the metrics listed above.  
Zone Criteria 
In addition to releasing a list of eligible census tracts, the secretary 
must also, by August 1, 2021, release the criteria for determining areas 
within the tracts to be designated as community impact zones. 
The criteria must take into consideration the goals, purposes, and 
requirements the bill establishes for CDCs and may give weight to one 
or more of the following: 
1. the existence of a public elementary school; early childhood 
center; or community center serving children, seniors, or both in 
the area; 
2. the existence of a local community organization comprised of 
residents and leaders in the area whose role complements the 
goals, purposes, and requirements for CDCs; 
3. the area’s proximity to existing or planned public 
transportation; and 
4. existing access to an asset-based housing organization focusing 
on homeownership and financial literacy. 
Designated Zones 
By June 1, 2022, each CDC must submit a proposal to the council for 
up to two geographically distinct areas within an eligible census tract 
in which it is located to be designated as a community impact zone. 
The council must, by August 1, 2022, announce its selections. It must 
designate one zone for a municipality with a population of 100,000 or 
fewer and two zones for a municipality with a population greater than 
100,000. 
If the council rejects a proposal or does not designate an area that a  2021SB-01104-R000663-BA.DOCX 
 
Researcher: RP 	Page 16 	5/11/21 
 
CDC proposed, it may allow the CDC to resubmit a proposal if a zone 
has not otherwise been designated. 
CDC Offices 
By February 1, 2023, or as soon as practicable following the zone 
designations, each CDC must establish an office or relocate its office in 
the zone. 
§ 4 — CDC TRUST FUND 
Establishment 
The bill establishes the CDC Trust Fund as a separate, nonlapsing 
fund and requires it to contain any money the law requires. The fund’s 
investment earnings must be credited to its assets. The CDC oversight 
council must use the fund for the CDC and CDCU purposes 
established under the bill. (The bill does not appear to authorize the 
fund to be used for the reading instruction and mental health and 
substance abuse treatment programs described above.) 
Investments 
The treasurer must (1) invest the fund’s deposits in a reasonable and 
appropriate way to achieve the fund’s objectives; (2) exercise a prudent 
person’s discretion and care; and (3) consider such things as rate of 
return, risk, term or maturity, portfolio diversification, liquidity, 
projected disbursements and expenditures, and expected gifts. The bill 
prohibits the treasurer from requiring the trust to invest directly in (1) 
obligations of the state or any of its political subdivisions or (2) 
investments or other funds he administers. 
The treasurer must continuously invest and reinvest the fund’s 
assets, consistent with the fund’s objectives, until they are disbursed. 
Report 
The treasurer must report, annually by December 31, to the CDC 
oversight council and Finance, Revenue and Bonding Committee on 
the fund’s receipts, disbursements, assets, investments, liabilities, and 
administrative costs for the prior fiscal year.  2021SB-01104-R000663-BA.DOCX 
 
Researcher: RP 	Page 17 	5/11/21 
 
§ 5 — STATE, MUNICIPAL, AN D NONPROFIT ORGANIZA TION 
DEPOSITS IN A CDCU 
The bill authorizes the state, municipalities, and federally tax-
exempt 501(c) organizations that are exempt from property tax to 
make deposits with a CDCU to be invested by the CDCU to further the 
bill’s community restoration and revitalization purposes. Each CDCU 
receiving such a deposit must provide a rate of return that is at least 
the London Interbank Offered Rate (LIBOR). 
§ 6 — LOCAL SALES TAX ON C ANNABIS AND CANNABIS 
PRODUCTS 
Rate and Base 
The bill imposes a 3% local sales tax on the sale of all cannabis and 
cannabis products, beginning on and after the date DCP first issues a 
cannabis retailer license. The local tax applies in addition to the 6.35% 
state sales tax on these products and must be administered in the same 
manner as the state tax (state sales tax on these products goes to the 
CDC Trust Fund (§ 7)). 
Under the bill, “cannabis” is any part of a plant or species of the 
genus cannabis, whether or not it is growing, including its seeds and 
resin; its compounds, manufactures, salts, derivatives, mixtures, and 
preparations; and cannabinon, cannabinol, and cannabidiol. It 
excludes a plant’s mature stalks; fiber made from the stalks; a 
compound, manufacture, salt, derivative, mixture, or preparation 
made from the stalks; fiber, oil, or cake; sterilized seeds; industrial 
hemp; and marijuana authorized to be cultivated or sold for palliative 
use. 
A “cannabis product” is a cannabis concentrate (e.g., oils and 
tinctures) or product containing cannabis, which may be combined 
with other ingredients, that is intended for use or consumption. It 
excludes raw cannabis plants. 
Tax Remittance 
Each licensed cannabis retailer making such sales to consumers (i.e., 
individuals age 21 or older) must (1) file a tax return with the DRS  2021SB-01104-R000663-BA.DOCX 
 
Researcher: RP 	Page 18 	5/11/21 
 
commissioner, on or before the last day of each calendar quarter, for 
the immediately preceding quarter and (2) remit the tax due with the 
return. The returns must (1) be in the form and contain the information 
the commissioner prescribes and (2) indicate the municipality (i.e., 
town, city, borough, consolidated town and city, or consolidated town 
and borough) in which the sale occurred. 
The bill prohibits any tax credits from being applied against the tax. 
Municipal Cannabis Revenue Account 
The DRS commissioner must deposit any local sales tax collected 
into a new municipal cannabis revenue account. The bill establishes 
the account as a separate General Fund account and requires it to 
contain any money the law requires. The DRS commissioner must use 
the account’s funds to provide the disbursements described below to 
each municipality in which cannabis retailers are selling cannabis and 
cannabis products to consumers. 
Accounting. The commissioner must maintain (1) an accounting of 
all deposits into the account, aggregated by municipality; (2) a list of 
amounts remitted by each cannabis retailer; and (3) any other 
information he deems necessary. He must make the respective 
information available to each municipality in which a cannabis retailer 
is located. 
Distributions. Beginning in the second calendar quarter after the 
initial deposit into the account, the commissioner must distribute to 
each municipality in which a cannabis retailer is located, and for which 
a point-of-sale can be determined, an amount calculated on a point-of-
sale basis. Any funds remaining at the close of the fiscal year for which 
the point-of-sale cannot be determined must be transferred to the CDC 
Trust Fund. 
Delinquent Taxes 
Under the bill, delinquent taxes are subject to a penalty of 10% of 
the tax due and unpaid or $50, whichever is greater, plus interest at 1% 
of the unpaid principal for each month or fraction of a month from the  2021SB-01104-R000663-BA.DOCX 
 
Researcher: RP 	Page 19 	5/11/21 
 
due date to the payment. 
Subject to the Penalty Review Committee provisions, the 
commissioner may waive all or part of these penalties when it is 
proven to the commissioner’s satisfaction that failing to pay the tax 
within the timeframe was due to reasonable cause and was not 
intentional or due to neglect. 
Liability for Willful Nonpayment of Taxes Collected 
The bill makes those who are responsible for collecting and paying 
the tax on behalf of a cannabis cultivation facility or cannabis retailer, 
respectively, personally liable if they willfully fail to collect, truthfully 
account for, or pay the tax and it cannot be collected from the business. 
Under the bill, an individual or officer, partner, or employee of a 
business who is responsible for paying the tax on the facility’s or 
retailer’s behalf is personally liable for the full unpaid tax, plus interest 
and penalties, if (1) he or she willfully fails to collect, truthfully 
account for, and pay it, or willfully attempts to evade or defeat the tax 
and (2) the tax cannot otherwise be collected from the facility or 
retailer. The dissolution of the business does not free the person from 
liability. DRS must credit any amount collected from such a person 
against the taxes owed by the facility or retailer. 
Tax Enforcement 
The bill applies the same collection, enforcement, and appeal 
process requirements established in statute for the admissions and 
dues taxes to the cannabis excise tax and local sales tax, unless the 
provision is inconsistent with the bill. Under these provisions, the DRS 
commissioner can (1) require the facilities and retailers to keep certain 
records and examine all of their records and (2) administer oaths, 
subpoena witnesses, and receive testimony. The facilities and retailers 
can request a hearing on the amount of taxes they are required to pay, 
and appeal the hearing decision if aggrieved. Lastly, an additional 
penalty may be imposed on facilities and retailers for willful violations 
or filing fraudulent returns.  2021SB-01104-R000663-BA.DOCX 
 
Researcher: RP 	Page 20 	5/11/21 
 
Regulations 
The bill authorizes the DRS commissioner to adopt implementing 
regulations for the tax. 
Recording Revenue 
The bill authorizes the comptroller to record the revenue the taxes 
generate each fiscal year no later than five business days after the end 
of July following the end of the fiscal year. 
§§ 7 & 8 — STATE SALES TAX ON C ANNABIS AND CANNABIS 
PRODUCTS 
The bill imposes a 20% state tax on sales of cannabis and cannabis 
products (as described above) and requires the DRS commissioner to 
deposit the revenue into the CDC Trust Fund for each calendar quarter 
ending on or after the date of the initial remittance of the tax. It 
prohibits any tax credits from being allowed against the tax. 
BACKGROUND 
Related Bills 
sSB 888 (File 569), favorably reported by the Judiciary Committee, 
establishes a state excise tax on cannabis and directs the revenue to the 
General Fund and two new accounts for specified purposes. It also 
imposes a 3% municipal sales tax on cannabis and cannabis products 
that applies in addition to the state’s 6.35% sales tax and requires 
municipalities to use the revenue for specified purposes. 
sHB 6443, favorably reported by the Finance, Revenue and Bonding 
Committee, directs any taxes collected and retained by the state on or 
after July 1, 2021 on recreational cannabis and cannabis products to a 
new Connecticut Equitable Investment Fund. 
Distressed Municipalities  
By law, the DECD commissioner must annually designate 
distressed municipalities based on a combination of economic, 
education, demographic, and housing criteria. In 2020, he designated 
the following 25 municipalities as distressed:  2021SB-01104-R000663-BA.DOCX 
 
Researcher: RP 	Page 21 	5/11/21 
 
Ansonia Bridgeport Bristol 
Chaplin Derby East Hartford 
East Haven Griswold Hartford 
Meriden Montville New Britain 
New Haven New London Norwich 
Preston Putnam Sprague 
Stratford Torrington Voluntown 
Waterbury West Haven Winchester 
Windham  
 
COMMITTEE ACTION 
Finance, Revenue and Bonding Committee 
Joint Favorable 
Yea 30 Nay 18 (04/22/2021)